Alistair Darling told the House of Commons today that the Government would guarantee individual savings of more than £35,000 after the unprecedented run on Northern Rock.

The Chancellor has previously hinted that the level of protection could rise to as much as £100,000 after he increased the sum protected by the Financial Services Compensation Scheme from £31,700 to £35,000.

He said today: “We've been very clear that £35,000 is a first step," he said. "I think we need to go beyond that.”

Mr Darling was addressing Parliament with a follow-up statement to his agreement on Tuesday to extend the Government's guarantee of Northern Rock to all new retail deposits.

Protection levels are being reviewed after about £2 billion was withdrawn by panicked savers from Northern Rock after the mortgage lender was forced last month to seek emergency funding from the Bank of England.

Raising the bar on protection to cover savings of up to £100,000 has drawn criticism from both the British Bankers' Association and the Association of British Insurers, who argue that about 90 per cent of UK bank accounts contain no more than £35,000 and raising the benchmark would prove expensive for lenders.

Mr Darling also promised today to examine Britain's financial framework in the wake of the Northern Rock crisis.

He told Parliament today that, at present, under the tripartite system, the Bank of England oversees financial stability, the Financial Services Authority (FSA) monitors individual firms and the Treasury is responsible for the legislative framework.

Mr Darling said: "I believe it's right that the Bank and FSA should continue with these roles — this is the model others around the world are now following.

"But we do need to review how the framework has operated and put in place whatever practical improvements are needed."

Mr Darling also said that laws governing takeovers would be reviewed to see whether a swift acquisition could be arranged, should an emergency arise again.

The FSA has already agreed to review the Northern Rock crisis and report its conclusions early next year.

The Chancellor said that the process of sorting out Northern Rock's future — whether it is via a takeover or it is pulled apart by asset-strippers or remains independent with the support of commercial loans — was likely to take until at least next February.

On Tuesday the Bank agreed to take a wider variety of collateral from Northern Rock to ease a possible sale of the bank.

Previously, the Bank has accepted only books of mortgages as security against its lending to Northern Rock.

"The Treasury, Bank and FSA continue to work intensively with Northern Rock with a view to helping it resolve the situation," Mr Darling said.

"Any future solution must lie with the company."

Mr Darling also proposed an early-warning system between the International Monetary Fund and the Financial Stability Forum to “strengthen financial sector surveillance” and identify risks to stability.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive